# Maximum loan sizing

Canonical: https://chicagocommercialfunding.com/tools/maximum-loan-sizing/

Find the binding constraint across LTV, DSCR and debt yield.

## Model inputs and hypothetical defaults

- Property value ($): 3000000
- Annual lender-adjusted NOI ($): 240000
- Maximum LTV (%): 65
- Minimum DSCR (×): 1.25
- Minimum debt yield (%): 9
- Annual interest rate (%): 7
- Amortization (years): 25

## How the model works

Maximum loan = minimum of value × LTV, NOI ÷ DSCR ÷ annual debt constant, and NOI ÷ minimum debt yield.

## Worked illustration

At $3 million of value, $240,000 NOI and 65% LTV, the value limit is $1.95 million. A 9% minimum debt yield permits $2,666,666.67. The amortizing DSCR test may establish a third, lower ceiling.

## Choose a consistent numerator

Start with the income definition the proposed lender will actually use. The NOI shown in a marketing package may omit management, vacancy or a realistic tax allowance. A lender may then deduct a replacement-reserve expense below NOI or apply other adjustments; preserve those definitions rather than assume every NOI already includes reserves. Some lenders size coverage and debt yield using different adjusted cash flows. This screening model uses one entered amount for both tests; if the definitions differ, run the relevant tests separately and preserve the reconciliation.

Property value is also an assumption. A requested purchase price, a completed appraisal and a stabilized future value answer different questions. Pair the value with the income period and property condition it represents. Do not size against future income while treating an as-is value and immediate proceeds as certain.

## Interpret the binding constraint

The lowest result controls this three-test screen. Increasing value cannot increase proceeds when DSCR remains the smallest limit. A lower rate can improve the amortizing DSCR limit without changing the debt-yield limit, because debt yield does not depend on payment terms. Reduce NOI and compare which constraint becomes binding. That change reveals why a lender can offer a lower leverage percentage than its advertised maximum.

The result is gross modeled principal. Fees, lender-held reserves, future advances, payoff requirements and closing adjustments can reduce usable cash. Build a sources-and-uses schedule using money available on the relevant date, then test the remaining equity requirement. A loan that fits the ratios can still be unsuitable because of recourse, covenants or maturity.

## Limitations

These are user-selected underwriting assumptions, not Jaken program requirements. Lender definitions of cash flow differ.

The canonical HTML page provides the interactive calculator. Inputs stay in the browser; hypothetical defaults are not current financing terms. Distinguish operating income, debt service, capital expenditures and investor distributions.

## Research and related reading

- [Source material](https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-handbook/files/commercial-real-estate-lending/index-commercial-real-estate-lending.html)
- [How the three loan constraints interact](https://chicagocommercialfunding.com/guides/ltv-dscr-and-debt-yield-the-three-loan-sizing-constraints/)
- [Reconcile lender cash-flow adjustments](https://chicagocommercialfunding.com/guides/how-lender-underwriting-adjustments-change-loan-proceeds/)